Both Isabel Marant and Chanel drew applause for recent collections, only to be called out after the fact for copying. This weekend, on the heels of showing its Metiers d'Art collection in Rome, Chanel was accused of copying the Fair Isle designs of Scotland-based knitwear designer Mati Ventrillon. Isabel Marant, on the other hand, is under fire for misappropriating the traditional designs of a group of indigenous Mexican people. While neither instance will likely lead to a massive legal dispute, that may not actually matter in the grand scheme of things. This is because the damage that has already been done – by way of an array of bad, bad press – is significant.
What is interesting about the aforementioned situations is that they represent a significant risk that businesses, especially fashion ones, regularly face. The sheer amount of negative press that Chanel and Isabel Marant are facing as a result of these instances of alleged copying is damaging not only to the brand's image but to their bottom line, as well. (Add to this the recent years of weak growth for nearly all luxury brands).
Negative press in fashion can be derived from an array of circumstances. Here, it is the result of alleged copying and cultural misappropriation (the latter of which applies more so in Marant’s case). In the past, we have seen it arise from the use of black face makeup on white models in magazine editorials, the use of Native American costumes, the casting of "shockingly skinny" models, and controversial statements made by creatives (think: Dolce and Gabbana, John Galliano, etc.). While the role of negative press is often not automatically viewed by brand executives as a harm as detrimental as a supply chain problem or a violation of law, it is, in fact, a serious business risk that must be taken into consideration on a consistent basis. Businesses with favorable reputations are perceived as providing more value, which often allows them to charge a premium -- something that is absolutely essential in the luxury sector, where bags cost at least $1,000 and dresses even more.
Moreover, according to the Harvard Business Review, brands with favorable reputations are better able to hold on to customers, as reputable brands have customers that are more loyal and that buy broader ranges of products and services. This focus on consumers buying a range of goods is important given the widespread licensing that takes place in fashion. The licensing of fragrances, eyewear, etc. serves as a significant source of income for high-end brands and an important mechanism for them to reach a wider audience. This is also a practice that may be hindered by a negative brand image. Also, we know that catering to existing customers is less expensive than seeking out new ones. Finally, because the market believes that companies with favorable reputations will deliver sustained earnings and future growth, these companies tend to have higher price-earnings multiples and market values and lower costs of capital.
With this in mind, it is in a brand's best interest to manage reputational risk in order to avoid the actual fruition of such risks whenever possible. A company’s overall reputation is a function of its reputation among its various stakeholders (investors, customers, suppliers, employees, regulators, the communities in which the brand operates, etc.) in specific categories (think: product quality, corporate governance, employee relations, customer service, intellectual property, financial performance, handling of environmental and social issues). A strong positive reputation among stakeholders across multiple categories will result in a strong positive reputation for the company overall, and vice versa, which is clearly linked to sales and revenue.
Harvard Business School professors, Robert G. Eccles, Scott C. Newquist, and Roland Schatz propose the following three questions as fundamental to the assessment and management of a brand's reputation: 1) What is the brand's reputation in each area (product quality, financial performance, and so on)? 2) Why?, and 3) How do these reputations compare with those of the brand's peers/competitors?
While these inquiries may seem relatively straightforward on paper, thereby, suggesting that reputation management is a moderately simple task, do not be fooled. As we can see from the copying cases, and from Dolce and Gabbana's relatively recent “traditional family” PR fail (and John Galliano's anti-Semitic rant before that when he was employed by Christian Dior; the time Hedi Slimane lashed out at critic Cathy Horyn on Twitter; and Nicolas Ghesquiere's not-so-nice words about Balenciaga on the heels of his departure from the Paris-based design house, etc.), systems to manage reputation are more difficult to implement in reality, especially when creative types, such as designers and creative directors, are introduced into the mix. However, this is certainly an effort that is worth noting and one that brands should keep on their radar, given the frequency with which such PR nightmares occur. Business reputation is key in fashion and it is something that is often problematic to fix after the fact. Thoughts?